In one of my increasingly common Ed Reardon moments, I found myself nodding in approval when reading this piece from the Grauniad (correction, the Guardian) especially when I came to what Peter York had to say about it. But then again, I am of an age when I recall that every aspiring candidate for an equity partnership in a 'magic circle' accountancy or law firm carried a Filofax (younger readers, please Google) and a copy of Mr York's Official Sloane Ranger Handbook. As Mr Reardon might say, "Elgar, they were the good old days my mucker!".

Employer's Agent/Contract Administrator - what's going on?

A change in 'accepted' sartorial standards is one thing, but a change in what one can expect from an Employer's Agent/Contract Administrator (EA/CA) is another thing altogether. This issue has come to light recently due to an increasing number of building contracts coming across my desk (sorry, laptop screen) where the Contractor is also the EA/CA. This is, I must admit, a new development to me and I have seen many over the past 30 years of soliciting.

It was remarkable how similar each of these cases were despite the fact that they involved different parties and different projects. There was no apparent business connection between any of them. Despite this the following common factors emerged:

• First, the Contractor suggested to the Employer that the Contractor be appointed the EA/CA because this would save cost, time and, in any event, where it was design & build the Contractor's appointment as the EA/CA was in line with the 'one stop shop' principle.
• Second, applications for interim payments did not follow what was agreed elsewhere in the building contract. Indeed, some were made too early and some too late when compared to the agreed date. There was no explanation for this.
• Third, payment notices were issued one month but not the next and, when issued, always matched the amount appearing in the Contractor's interim payment application. Again, there appeared to be no explanation for this so one must assume it was pure coincidence and one that occurred more than once and on unconnected projects.
• Fourth, there was no correspondence from the EA/CA to the Employer where the words 'pay less notice' were used. This included occasions when (as we will come to) there was correspondence between the Employer and the Contractor as to issues of quality of work and progress on site.
• Fifth, where there was no payment notice or 'pay less' notice, the Contractor's invoice was for the full amount of its interim application. However, this was a minor issue because (as I have mentioned) where a payment notice was issued by the EA/CA it always matched the Contractor's interim payment application.
• Sixth, the parties' relationship had started to fall apart because the Employer took the view that having paid more than half the Contract Sum the Works should, at the very least, be more than 5% complete. In addition, the Employer could not understand why the EA/CA had issued Change/Variation orders and full extensions of time (EOT) coupled with loss and/or expense (again in the sum claimed by the Contractor) when, as far as the Employer could see, nothing had changed.
• Seventh, a number of the sub-contractors 'walked off' telling the Employer they had not been paid by the Contractor, complaining there was no or very little site management and, in one case, informing the Employer (with photographic evidence) that the Contractor had removed all of the site welfare facilities.
• Eighth and last, the Employer refused to pay the Contractor's latest interim application that the EA/CA had, once again, certified in full. On one case, the refusal to pay was met with a further EOT taking the Completion Date far into the future.  At this point the parties called their legal advisors.

I don't know if any readers have experienced this new development but what can one say other than it smacks of contractual skulduggery. That said, I was told by one Contractor claims consultant (also a prominent construction adjudicator) that it was all correct and beyond reproach and, in any event, I was told in very strident terms (I had to look up some of his words in my pocket dictionary of the vernacular) that the Contractor did not owe the Employer any obligation as the EA/CA when administering the building contract.

Well, I don't agree with what the claims consultant/adjudicator told me. I know I am old-fashioned but I prefer what the judges said in Sutcliffe v. Thackrah (1974) even though in that case the EA/CA was one appointed by the Employer. The House of Lords came to the view that a professional consultant had an implied duty to act impartially when deciding questions between its client and the contractor. This means acting independently, honestly, fairly and without bias. That does not seem to be an unreasonable conclusion to reach.

A similar view had been expressed in the earlier case London Borough of Hounslow v. Twickenham Garden Developments Ltd (1971) and there are a number of more recent court judgments that repeat the need for the EA/CA to act independently, impartially, honestly and fairly. The EA/CA must not favour either Contractor or Employer. The fact that these cases involved an Employer appointed EA/CA rather than a Contractor appointed one is not, I consider, sufficient to entitle a Contractor appointed EA/CA to act partially, dishonestly and unfairly.

There is also judicial comment that where the Employer and EA/CA collude so as to deny the Contractor a contractual right it would otherwise be entitled to, the EA/CA could itself be liable in the tort of inducing a breach of contract - see John Mowlem & Co v. Eagle Star Insurance & Others (1992). I am a simple lad, but I consider the reverse to be equally true.

Finally, the editors of Keating on Construction Contracts (10th edition) know a thing or two about such matters and explain where an EA/CA can be liable to a Contractor. I consider their wise words apply equally to a Contractor EA/CA.

Conclusion & Advice

My work continues but to avoid you and/or your clients ending up in a similar situation I would suggest you stick to the old ways, i.e. appoint a third party EA/CA to do the job of administering the building contract. I know this is far from perfect because disputes over EOTs, interim valuations etc will still arise but, at the very least, there will some degree of independent, honest and fair certification under the building contract.

As for an electric blue sequined jacket and gold leather trousers topped with a funky pink hairdo, I would stick with PPE when on site. As for the office, I would prefer a suit and tie but can be daring and wear odd socks when the mood grabs me.